South Korea

South Korea - Taxes and incentives for renewable energy

South Korea taxes and incentives for renewable energy KPMG Global Energy & Natural Resources.

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Support schemes

Investment and other subsidies

In 2004, the South Korean government passed the Act on the Promotion of the Development, Use and Diffusion of New And Renewable Energy (the Act). With the goal of becoming one of the five largest producers of new and renewable energy, the government has announced that a total of South Korean won (KRW)40 trillion (EUR25.8 billion, USD34.2 billion) will be invested in renewable energy by 2015.

This investment includes KRW22.4 trillion invested by the nation’s 30 largest industrial groups by 2013, KRW7 trillion of government contribution, and KRW10.6 trillion from other private sectors. South Korea has already seen substantial financial investment in renewable energy in recent years, including KRW1.8 trillion (EUR1.3 billion, USD1.8 billion) from the government in the last 2 years (2012–2013).

According to the second national energy plan announced in January 2014, the former renewable energy target, 11 percent of the total energy supply from renewable sources by 2035, has been reaffirmed.

To reach this goal, the government is implementing initiatives in four major areas:

  • strategic R&D and commercialization
  • promotion of industrialization and market creation
  • promotion of exports of new and renewable energy products
  • infrastructure development.

The total budget for renewable energy in 2015 has reached KRW7.8 trillion (EUR619.09 million, USD697.2 million) to develop technologies; support renewable energy distribution, and promote entering overseas markets. The government also supports overseas renewable energy business for small and medium-sized enterprises with a budget of KRW10 billion in 2015.

Operating subsidies

Feed-in tariff

  • The feed-in tariff was abrogated at the end of 2011 due to the introduction of the Renewable Portfolio Standard (RPS) in 2012. (The government maintains a feed-in tariff only for existing recipients. The existing recipients may have options to either maintain their feed-in-tariff or exchange them for REC (Renewable Energy Certificate) that enables transactions under the RPS).
  • To accommodate small renewable energy facilities that could not receive support by RPS, the Seoul Solar Power Plant Support Plan was announced in May 2013. The plan supports operations from the installation of solar power plants to sales for small entities under 100kW capacity established since 2012 in Seoul. According to the plan, the small entities can receive KRW50/ kWh (approximately 10 percent of installation cost) for the amount generated in 2014, and KRW100/kWh for 2015. The subsidy is given for 5 years from the first year of provision.

Premium

The R&D tax credit program is applied for renewable energy technologies. Import duties are reduced by 50 percent for all components and/or equipment used in renewable energy power plants that cannot be manufactured domestically. This import duty premium will be abrogated on 31 December 2015.

The Financial Support Program for Renewable Energy in South Korea is comprised of four main categories: R&D support, soft loans for renewable projects, feed-in tariffs and renewable energy distribution support.

The total budget of 2015 consists of KRW6.4 billion for R&D support, KRW319.2 billion for the feed-in tariff, KRW115 billion for soft loans, and KRW102.9 billion for distribution support.

Quota obligation

  • In 2012, the existing feed-in tariff was replaced by an RPS that was approved by the government assembly in March 2010.
  • The RPS requires 17 state-run and private power utilities, as of 2015, with a capacity in excess of 500 MW to generate three percent of the energy production from renewable sources in 2015. This percentage will be increased in stages to 10 percent by 2024.
  • In terms of the standard price per certificate, REC for solar power was KRW175,503 averagely in 2013, while REC for non-solar power was determined to be KRW 137,844. In 2014, the average price of REC for solar power was KRW113,997, and that of REC for non-solar power was KRW113,174.
  • The total RPS target for 2015 is set by 12,339,927 MWh, increased from the last year’s target of 11,578,809 MWh, while the RPS target for solar power rose 46 percent from 1,353,000 MWh to 1,971,000 MWh in 2015. It was announced that the total RPS target for 2015 is 12,339,927 MWh; increasing 9.3 percent from the target for 2014, while the RPS target for solar power after 2015 is 1,971,000 MWh increased by 6.8 percent from the last year target. The Renewable Fuel Standard (RFS) has been launched on 31 July 2015. The RFS requires oil refiners and oil importers and exporters to blend a certain amount of new and renewable energy fuel into their transportation fuels. The RFS target in 2015 has been affirmed as 2.5 percent with biodiesel only.

Additional information

One Million Green Homes Project

As a part of the 2009 budget, the government appropriated KRW94.3 billion (USD72 million) for the One Million Green Homes Project. The intent is to build one million homes by 2020 that use one of the following renewable energy technologies: solar thermal, solar photovoltaic, geothermal, biomass and wind energy. Each year, the government will set a new budget for the coming year. The budget in 2014 is KRW54.9 billion, and the cumulative budget for the Project reached KRW671.2 billion from 2004 to 2014.

The green homes being built are environment-friendly and use new and renewable energy resources. In addition, green homes create no carbon emissions and use less energy, water and natural resources.

New Energy Businesses

The government announced six new energy businesses in 2014:

  • electricity demand response
  • integrated energy management service
  • independent microgrids
  • PV rentals
  • electric vehicle servicing and charging
  • recycling wasted heat from thermal power plants.

The new energy businesses are expected to create a market worth KRW4.6 trillion by 2017. This is based on an investment of KRW1.83 trillion in 2015, including KRW800 billion raised in the private sector.

Taxes and Incentives for renewable energy

A 2015 KPMG report that provides updates on renewable energy promotion policies for over 31 countries.

 
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