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Cells Earn Prominent Position Within South Korean Renewable Portfolio Standard Pricing Mechanism

Fuel cells are expected to represent a significant portion of NRE purchasing under the RPS as the clean, efficient and distributed generation attributes of fuel cells meet the needs of utilities and the requirements of the RPS.
by Staff Writers
Danbury CT (SPX) Jan 17, 2011
FuelCell Energy has announced that the South Korean Ministry of Knowledge Economy has issued the final ruling providing the funding mechanism for new and renewable (NRE) power sources under the Renewable Portfolio Standard (RPS) previously announced in March, 2010.

On December 29, 2010, the South Korean Ministry of Knowledge Economy confirmed the RPS and established the pricing mechanism for NRE power generated under the mandates of the RPS.

Fuel cells operating on natural gas and renewable biogas have earned a prominent position within the pricing mechanism due to their efficient and reliable generation of clean power.

The RPS passed by The National Assembly of the Republic of Korea requires NRE power sources to provide two percent of the power generation by 2012, increasing each year by 0.5 percent to 1.0 percent, reaching four percent by 2016 and ultimately, ten percent by 2022. Presently, only about one percent of the approximately 71 gigawatts of power generation capacity that falls under the RPS mandates is generated by renewable power sources.

Utilities and independent power producers in South Korea are expected to purchase NRE power generation plants now that the pricing mechanics of the RPS have been confirmed. The RPS applies to power producers that generate more than 500 megawatts (MW) of power annually, impacting an estimated 15 utilities and independent power producers.

Fuel cells are expected to represent a significant portion of NRE purchasing under the RPS as the clean, efficient and distributed generation attributes of fuel cells meet the needs of utilities and the requirements of the RPS.

South Korea imports over 95 percent of the fuel used to generate electricity, thus driving the need for highly efficient power generation. Fuel cells generate power through a highly efficient electrochemical reaction that does not involve combustion, thereby emitting virtually zero pollutants.

Direct FuelCells offer the highest efficiency of any base load power generation technology in or near their size range. An additional attribute of fuel cells is that they reliably generate power at the point of use, reducing congestion of the transmission grid.

"South Korea continues to innovate and lead the global adoption of renewable energy programs as a means to improve its environment and strengthen its economy," said R. Daniel Brdar, Chairman and CEO, FuelCell Energy, Inc.

"The Government initially encouraged the installation of fuel cells by implementing a feed-in tariff in 2006 with an aggregate limit of 50 MW over the life of the program. This new RPS program, with a goal for approximately 7,000 MW of new and renewable power by 2022, creates a substantially larger market opportunity for fuel cell power plants."

Each type of NRE power generation received a ranking or weighted value for calculating the price per kilowatt for the power generated. Higher weighted values are beneficial, resulting in a higher price paid for the electricity generated. Fuel cells received the highest weighted value of 2.0, recognizing the environmental advantages and high capacity factor of fuel cells.

Power producers are paid based on the actual power generated so reliable baseload power from fuel cells is highly valued compared to the intermittent nature of some types of renewable power such as wind or solar.

Each megawatt hour of power generated from a new and renewable resource will generate one Renewable Energy Credit (REC). Renewable power generated will receive a price above the market rate of electricity based on the price of the REC multiplied by the weighted value of the renewable energy source. A trading market for buying and selling RECs will be developed.

An independent third party will certify the power generated from new and renewable resources. Utilities and IPPI havs may either install qualifying new and renewable energy technologies, or purchase RECs from the market. Penalties for non-compliance are expected to be severe enough to encourage compliance with the regulations.

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