Power prices up and wind installations down as South Korea grapples with renewables challenge

The challenges that South Korea is facing in pursuing its renewables growth targets have been highlighted by a BloombergNEF study that detected falling installation rates and rising prices for green electricity, but also found reason to believe that the country can start realising its offshore wind ambitions.

In its latest Energy Transition Market Outlook for the country, BNEF found that South Korea added a record 1.2GW of corporate clean power purchase agreement (PPA) capacity last year, reflecting growning demand in the segment.

Over 723MW of deals were announced in the last three months of 2024, encouraged by an industrial electricity tariff increase which made PPAs more competitive, the report found.

But BNEF also highlighted the difficulties that Korea has been facing in scaling up renewables deployment, and forecast that PPA offtake prices will rise by about 12% in 2025 as demand from corporate clean energy procurement runs ahead of supply.

In the onshore wind sector, South Korea installed just 114MW of capacity in 2024, some 30% less than the previous year, due to “persistent delays in projects, hampering installations”, according to Analeigh Suh, Korea energy analyst with BNEF.

Despite finding 10.7GW of projects with preliminary permits (Stage-1) in the pipeline, BNEF said it expects only 1.5GW to be commissioned in 2027-2035. This is because “most projects are struggling to obtain the final (Stage-2) permit due to local community opposition,” Suh stated.

Even in the solar sector, where South Korea’s levelized cost of electricity (LCOE) is falling in line with global trends, BNEF found that consumers are paying a high price for clean power.

“This stems from the country’s highly regulated power market structure where the retail power price doesn’t fully reflect the cost of generation,” the report stated.

On the other hand, South Korea added 3.2GW of solar capacity in 2024, ending four-year sequence of falling installations.

In offshore wind, the outlook seems to be improving, the report suggested.

BNEF noted that local content and readiness to move forward were the main determinants for winning projects in the 2024 auction, representing a departure from the previous year's outcome.

The success of the 538MW Equis Anma Offshore Wind Phase was seen as pivotal because the same project had lost out in 2023, even though it was in an advanced stage and with a plan to source all major components from Korean partners.

“This project is expected to close the financing in 2025, leading the country’s era of large-scale offshore wind project financing deals,” Suh wrote.

Despite offshore wind receiving bipartisan political support, BNEF said the market had struggled to accelerate deployment due to complex permitting process and frequent changes in auction rules.

Buildout boom?

However, the underlying progress that Korea is making in laying the groundwork for the offshore wind buildout was reflected in a much more positive BNEF view on what comes next.

BNEF said the Ministry of Trade, Industry and Energy (MOTIE) “sent a long-awaited signal to market players” in August when it set an offtake target of 8GW of offshore wind through government-led auctions for the next three years.

South Korea’s overall energy transition investment hit a new high of $27.6bn in 2024, up 5.4% from 2023. Within this, renewable energy investment hit a record $6.2bn, up 54% from 2023.

BNEF described this as all the more remarkable coming during the administration of President Yoon Suk Yeol, who was known to favour nuclear energy over renewables.

Pivotal moment

The report described financial closure of the 365MW Nakwol offshore wind farm by Myungwoon Industry Development as a pivotal moment. “South Korea’s rebound in renewables investment was driven by a single offshore wind deal worth $1.7 billion, which accounted for 28% of the total investment in 2024.

BNEF now expects renewables investment in South Korea to double in 2025 and reach a new record of $12bn, driven by three large-scale offshore wind projects.

It described other projects awarded in the annual auction in 2023 and 2024 – Sinan Ui (396MW), Taean (500MW), and Anma (532MW) – are set to close financing this year.

The BNEF report noted that South Korea made progress on key energy issues despite political turmoil that included the short-lived imposition of martial law in December 2024 and the subsequent impeachment of President Yoon Suk Yeol.

Measures included finalisation of Korea's energy roadmap on February 21and the passage of three special bills on energy.

The offshore wind bill includes provisions aimed at streamlining the permitting process, with a greatly increased role for central and local governments in early-stage project development, BNEF noted

"With the public sector’s growing role, the government will open the bidding for sites where issues relating to local community opposition or resistance have been resolved," the report stated.

The special bill on grid enhancement is expected to reduce the prolonged grid facility site designation process from between four and five years to two years. The bill also aims to establish a National Grid Committee to facilitate coordination between government agencies.

The resumption of the energy storage auction process and an updating of the power grid plan are already helping to restore momentum, BNEF said.

The current roadmap sets a cumulative capacity target for solar, wind and other renewables at 78GW by 2030 and 121.9GW by 2038.

In the crucial offshore wind sector, most analysts, including BNEF have forecast South Korea’s cumulative capacity will fall far short of a government target of reaching 14.3GW by 2030.

A clue as to how much ground Korea can make up may come in May, when a government-led site development auction is scheduled, Suh noted.

Many hopes for accelerating the ramp-up of offshore wind are being pinned on the offshore wind bill, with the promised streamlining of the permitting process - a key element of the bill - identified as "the most critical component developers were hoping for", according to Suh.

Swift implementation urged

In a separate statement, Seoul-based campaign group Solutions for Our Climate (SFOC) also commented on the importance approval of the bill.

"South Korea's current offshore wind capacity remains at just 0.2GW, only 1% of the 2030 target of 14.3GW. Progress has stalled due to regulatory uncertainty, permitting inefficiencies, and stakeholder conflicts," the group stated.

"Offshore wind development has long taken place in public waters, but without a tailored legal framework. As a result, fragmented approvals and unclear site selection caused numerous project delays".

SFOC endorsed the shifting of site selection from private developers to the government.

"The government will now establish a centralised site information system, conduct inter-ministerial consultations, and engage with local stakeholders before designating wind farm zones. Sites will be assessed for economic, environmental, and social feasibility, and project developers will be chosen via competitive bidding.

SFOC said the integrated permitting process reduces inefficiency and uncertainty while enabling investments in supply chains, ports, vessels, and grid infrastructure.

Turning the bill into law will mean "less bureaucracy, faster approvals, and a clearer path to scaling up offshore wind energy — a crucial move to reduce reliance on fossil fuels,” the group said.

“The special act is a major step, but now we need action," said Yebin Yang, Policy Analyst at SFOC

"For offshore wind to succeed, the government must swiftly enforce this legal framework, providing regulatory clarity for investors and communities alike.”