South Korea incentivizes energy storage deployment with solar PV plants, LG Chem set to benefit

South Korea incentivizes energy storage deployment with solar PV plants, LG Chem set to benefit

South Korea incentivizes energy storage deployment with solar PV plants, LG Chem set to benefit Energy Storage Journal

The South Korean goverment is offering concessional terms on RECs if energy storage facilities are co-located with existing solar plants


The South Korean government plans to encourage PV plant operators to build accompanying energy storage, to support the integration of renewable energy into the grid.

The announcement was made by the Ministry of Energy Trade and Industry (MOETI) in September.

According to local news reports, operators that install energy storage systems at their solar plants will be given additional points on assessment of their renewable energy certificates (RECs) starting in 2017.

The incentive covers storage co-located with new solar PV plants as well as retroactive storage installations with existing PV plants. The incentive is chemistry agnostic, though domestic lithium ion battery producer LG Chem has supplied several projects.

A similar incentive awarded to onshore wind farm operators that add energy storage was introduced in 2015.

REC-awarded electricity is generated from renewable energy resources, including onshore and offshore wind and biomass as well as solar.

The energy storage incentives are aimed at encouraging local power operators to store energy in large-scale batteries for more electricity distribution.

Wind turbines operate at a wind power generation site developed by LG Chem and GS E&R in Yeongyang, North Gyeongsang Province

Wind turbines operate at a wind power generation site developed by LG Chem and GS E&R in Yeongyang, North
Gyeongsang Province


The government estimates that Won440 billion ($392 million) of new demand for electrical energy storage will be created by 2020, due to the support mechanism.

Meanwhile, South Korea is shutting down some of its coal-powered plants. The renewable energy target is for 6% by 2020.

Because existing PV farms in Korea are usually smaller in size, compared with wind, and land for solar PV projects is in short supply, the electrical energy storage projects are smaller in scale compared with those developed for wind farms.

However, for operators that are planning new PV farms and are considering co-locating energy storage at the development stage, these plants can increase their output, by storing electricity and feeding into the grid when demand is high but solar output drops, from late afternoon through to evening.

In 2015 LG Chem — one of South Korea’s largest lithium ion battery makers and a global exporter of battery storage — built a 50MWh battery plant for local company GS E&R. GS E&R installed the battery with a wind farm that it completed in September 2015.

The battery, which started operations this January, will receive MOETI’s incentive until 2017. This is the world’s largest wind power storage system.

In 2012 South Korea introduced a renewable portfolio standard (RPS) to replace the previous feed-in tariff system, to try and accelerate renewable energy deployment and create a competitive market place for the renewable energy industry.

The RPS requires the country’s largest state-owned power companies to steadily increase their renewable energy mix in total power generation until 2024. The target is 3.5% in 2016, rising steadily to 6% in 2020 and 10% in 2024. To meet their RPS targets power producers can invest in renewable energy generation themselves. A solar PV farm above 30kW in size and onshore wind farms receive one REC. Alternatively RECs can be traded.

Power companies must submit their gathered RECs to the New and Renewable Energy Centre (KNERC) on an annual basis. If a utility cannot present the required number of RECs, KNERC fines them, which is 50% above the average market price for the REC for that same year.

Under MOETI’s energy storage incentive a wind or solar PV plant will receive additional RECs for building an energy storage system.

MOETI will evaluate the results of the policy after three years. The calculation method for RECs for energy storage co-located with renewable energy generators, is not limited to one certificate. Multiple RECs can be awarded, even for the same amount of energy supplied, though the maximum amount of RECs will decrease each year. To receive additional RECs permissible with the addition of energy storage, certain conditions have to be met.

The operator of a wind farm has to ensure that the electricity stored in the co-located battery is discharged at the time of “peaks” that are announced by MOETI in each season. RECs are awarded based on the amount of energy discharged in that time.

To comply, the PC operator needs to limit feed-in to the grid to hours outside of peak solar electricity generation. The energy storage system will need to be charged from between 10:00 and 16:00. Electricity must only be released into the grid outside of the timeframe to receive RECs.

A source within LG Chem expects the company to be number one in South Korea in terms of awarded and supplied energy storage projects co-located with renewable energy plants, due to the proven safety of the company’s batteries in the market and its ability to produce quantities to meet demand. By May 2016, the company had been awarded 1.6GWh of stationary storage projects globally.

Domestic demand 

While there is no mandate to force every new solar PV and wind plant to be developed with a storage component, Korea Electric Power Corporation (KEPCO), one of the largest of the country’s state-owned utilities, and its various subsidiaries, do have a tendency to follow policies announced by MOETI, according to the source.

Most of South Korea’s power companies, which are all state-owned, are likely to drive the country’s deployment of grid-scale energy storage via public private partnership-style cooperation with industrial players such as LG.

“Based on the announcements of MOETI, LG Chem is proposing customized solutions for operators by assisting power companies with the planning of energy storage capacity for proposed wind and solar PV plants and providing economic analysis of the projects in terms of when they can expect to achieve payback,” says the source.

LG Chem is also supplying the batteries for a 27MWh energy storage system being built on Jeju, South Korea’s largest island, which functions as a semi-autonomous province. Jeju has ambitious plans to become carbon neutral by 2030, which the president Park Geun-hye promoted during her speech at the COP21 UN climate change talks, held in Paris in late 2015.

The battery, which will be installed by the end of this year, will be used to stabilize the output from wind turbines on the island during peak hours.

LG Chem’s sister company LG CNS will operate the energy storage system, while LG Electronics, another affiliate within the LG Group, is providing the power conditioning technology for the energy storage plant. The island’s energy company tasked with developing the island’s renewable energy capacity, Jeju Energy Corporation, contracted LG CNS.