Climate Ministry Lowers Solar Power Contract Price Cap by 5%

The government will lower the upper bidding price for long-term fixed-price contracts with solar power producers by 5% compared to last year. The move aims to expand renewable energy supply within the same budget by reducing solar power generation costs.

The Ministry of Climate, Energy and Environment announced on the 16th the first solar fixed-price contract competitive bidding of the year on the Korea Energy Agency’s website. The total announced volume is around 1,000MW, similar to previous years, but the upper bidding price was reduced by 5% to 147.686 Korean won per kilowatt-hour (kWh) from last year. The ministry explained, “The price was adjusted reflecting the steady decline in solar power generation costs and bidding demand.” Power producers must bid below this upper limit, and lower prices increase their chances of securing contracts.

The government maintained its policy of providing incentives for using low-carbon solar modules. It grades modules from 1 to 4 based on carbon emissions during production, with grades 1 and 2—those with lower emissions—receiving higher price recognition during bidding evaluations. The preferential price for grade 1 was raised to 16 Korean won per kWh from last year’s 12 Korean won, while grade 2 was lowered to 7 Korean won from 9 Korean won, widening the incentive gap.

This measure follows the government’s policy to gradually reduce solar power generation costs. In the first renewable energy basic plan announced in May, the government outlined a direction to gradually lower long-term fixed-price contract rates in line with technological advancements and declining costs.

The government is also pushing to revise the Renewable Energy Act to reorganize the Renewable Energy Supply Obligation (RPS) system around long-term fixed-price contracts. The bill is currently pending in the National Assembly’s Legislation and Judiciary Committee. If passed in the second half of the year, the spot renewable energy certificate (REC) market will be phased out over three years and replaced by the long-term fixed-price contract system.

The Ministry of Climate, Energy and Environment and the Korea Energy Agency plan to hold an online briefing session on the 21st to explain the bidding changes to solar power producers. Sim Jin-su, the ministry’s Renewable Energy Policy Director, said, “If the Renewable Energy Act revision passes, we will promptly release detailed plans for a stable transition to the long-term fixed-price contract system.”