"Special Act to Revitalize Distributed Energy" Passes the National Assembly of Korea

- Creating an institutional foundation for the establishment of local energy systems

- Enactment of subordinate laws (enforcement decrees, implementation rules, etc.) and promotion of comprehensive measures for distributed energy

- Electricity tariff will vary from region to region

National Assembly

"The proposed Law on Distributed Energy passed the plenary session of the National Assembly of Korea on May 25 (Thursday). The Law on Distributed Energy was proposed to overcome the limitations of the existing centralized power system, such as social conflicts frequently occurring due to the low acceptance of local residents during the construction of large-scale power plants and long-distance transmission networks, and to establish a distributed energy system that allows electricity to be generated and consumed near demand locations.

 The main contents of the Law of Distributed Energy include the 1) Power System Impact Assessment for regional distribution of large-scale power demand, 2) Distributed Energy Specialized Area system for direct power trading, and 3) Integrated Power Plant system for integrating small-scale distributed resources and trading them in the power market as one power plant.

In addition, there is a 1) distributed energy installation obligation system to expand distributed energy in areas with low power self-sufficiency rates, 2) a stable grid management role for power distribution companies to utilize distributed energy more reliably, and 3) provisions on the basis of implementing regional electricity tariff systems for balanced national development.

With the enactment of the Law on Distributed Energy, it is expected that it will be possible to create distributed benefits by avoiding the construction of transmission networks due to the gap between the supply and demand of electricity by regional units. In addition, it is expected to enable the transition to a future local energy system in which locally produced energy is consumed in the same area, while creating a new energy industry utilizing ICT technology.

The Ministry of Trade, Industry, and Energy plans to prepare for the implementation of the Law on Distributed Energy (one year after the promulgation of the Law) by promptly preparing the Enforcement Decree and Implementation Rules, while also preparing a comprehensive plan to revitalize distributed energy within the year to implement the main systems of the Law on Distributed Energy.

<Key takeaways>

1. Background

□ The existing centralized power system centered on large-scale power plants and transmission lines has reached its limits and needs to be transformed into a sustainable and future-oriented power system. The existing system has caused problems such as social conflicts and low public acceptance of power grid construction such as transmission towers and transmission lines.

ㅇ Therefore, an institutional foundation is needed to match power supply and demand at the regional level to avoid the construction of large-scale transmission networks due to power supply and demand gaps.

□ As volatile renewable energies such as solar and wind power expand, the instability of the existing centralized power system increases, and it is important to balance the power supply and demand of the distribution network. 

* Solar and wind power generation is intermittent due to weather dependence, making it difficult to stabilize the supply of electricity.

ㅇ With the expansion of distributed resources, it is necessary to balance power supply and demand by distributing demand to distribution network units and to ensure stable operation of the distribution network.

□ New system design is needed to discover electricity demand according to regional characteristics, create distributed energy benefits, and spread various distributed power sources.

 * Need to establish a legal basis for expanding distributed benefits such as avoiding large-scale transmission network construction, creating electricity demand to secure supply and demand balance in the region, and promoting the entry of new distributed resources (SMR, fuel cells, ESS, etc.).

<Conventional Energy System> vs <Future Distributed Energy System>

1) Basic Direction

- <Concentrated power generation based on large-scale power plants> vs <distributed power generation centered on regions>

- <Remote coastal power generation → Consumption within the metropolitan area> vs <Energy production and consumption within regional units>

2) Infrastructure

- <Transmission grid-based nationwide network> vs <Regionally-oriented distribution network?

3) Trading

- <Electricity market centered on economies of scale> vs <Self-consumption, near-demand trading>

2. . Main contents

◇ Establishment of a legal basis for the transition to a distributed energy* system, including power system impact assessment, integrated power plants, distributed energy specialty areas, and strengthened distribution network management.

 * (Definition) Any power generation facility of 40 MW or less that can be installed near electricity demand areas to minimize the construction of transmission lines, or collective energy, district electricity, and private power generation facilities of 500 MW or less.

** (Business type) Includes renewable energy such as solar and wind power, as well as small and medium-sized nuclear power generation projects (SMR), fuel cell power generation projects, hydrogen power generation projects, and ESS.

(Power System Impact Assessment) Evaluation of the impact of new large-scale power consumption facilities on the power system in order to mitigate the concentration of power demand in saturated areas such as the metropolitan area.

□ (Specialized areas) Designate areas where innovative systems such as direct trading of electricity are applied to introduce a power system suitable for local characteristics.

 * The governor of a city or province establishes a specialized area plan and applies for designation to the Minister of Trade, Industry, and Energy; the Minister of Trade, Industry, and Energy approves and designates specialized areas after deliberation by the Energy Commission.

□ (Integrated power plants) Integrated power plants to induce stable participation of small-scale distributed energy in the electricity market

 * A business that connects and controls energy resources using information and communication technology to operate as one power plant.

□ (Installation Obligation System) Encourages new residential and urban development companies over a certain size to cover part of their energy use with distributed energy.

□ (Strengthening grid management) Assigning distribution companies the role of grid management through output forecasting, monitoring, and evaluation of distributed energy connected to the grid.

□ (Regional pricing system) Regulate the basis for electricity sales companies to set different electricity rates for each region in consideration of transmission and distribution costs, etc.

 * Establishment of a basic plan for the promotion of distributed energy, establishment of a distributed energy promotion center and support center, expansion of distributed energy benefits, investment of funds, and training of personnel.

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• This blog is made to share energy news in Korea, especially for renewable energy such as solar PV, wind power, electric vehicle, EV charger, ESS and hydrogen, etc
• This article is translated into English by DeepL, and partly edited and summarized by Kimoo Heo in Korea, https://www.linkedin.com/in/kimoo-heo-49395557/