South Korea’s Ministry of Climate, Energy and Environment has published draft implementing rules for the auction-based “contract market” that will replace the country’s renewable quota system from Jan. 1, 2027. It presented them at a public hearing in Seoul on Sept. 30.

Under the draft enforcement decree, Kepco will sign long-term fixed-price contracts with winning projects on behalf of all entities required to buy the power, including local electricity suppliers and large consumers that purchase directly from the market. It will settle the difference between the contract price and the wholesale power price with each project monthly and recover the costs through electricity tariffs.

The ministry plans to hold two to four tenders a year, organized by energy source, with total auction volumes rising year on year under five-year roadmaps. A solar and onshore wind roadmap is due by the end of the year, aligned with the 12th Basic Plan for Electricity Supply and Demand. The offshore wind roadmap was published in June. A public-private cost evaluation committee will set ceiling prices for each energy source annually, at a level reflecting generation costs plus a reasonable return.

Bids will be scored on price and on non-price factors, which the draft enforcement rule lists as community acceptance, contribution to the domestic renewables industry, and grid impact. The REC multipliers used under the current system will be converted into “preferential prices.” The ministry’s examples include floating, agrivoltaic, and rooftop solar, projects in areas with spare grid capacity, community ownership, and contributions to supply chains and energy security.

Projects of 500 kW or less will compete in a separate contract market under the same ceiling prices. Portfolios of at least 1 MW aggregated as virtual power plants could receive incentives for bidding into the main market, and designated renewable energy service companies will support small developers.

Large public generators, defined as those with at least 500 MW of conventional or 100 MW of renewable capacity, will face capacity-based deployment obligations. They can meet these only by building projects directly or taking equity stakes, and face penalties of up to 150% of a government-set unit price for shortfalls.

Private generators with at least 500 MW and selected public institutions will instead be set deployment targets, with fines of KRW 10 million ($7,500) for missing them. The ministry is also considering reflecting compliance in environmental, social, and governance ratings. Up to 20% of an obligation or target can be met through an alternative compliance payment, rising to 30% for the first three years.

New projects will stop receiving RECs after Dec. 31, 2026, while existing projects keep issuing them for up to 20 years. The REC spot market will close at the end of 2029. Before then, spot-market sellers can bid into an annual “transition market” for long-term contracts covering the rest of their 20-year term, with ceiling prices falling each year to encourage early switching. Total quota obligations will be frozen at 2026 levels.

A new type of generation information certificate will replace RECs as the attribute-tracking instrument. For projects in the contract market, the certificates will pass to KEPCO for use in its green premium program. Other projects can sell theirs to corporate RE100 buyers through a Korea Energy Agency platform.

The ministry plans to publish a detailed implementation plan in November, finalize the regulations by the end of 2026, and announce the first contract-market tender in the first quarter of 2027. It said all figures in the drafts could change after consultation.

The amended law was promulgated on Sept. 15. About 210,000 plants with a combined 35.4 GW were registered under the quota system as of September, according to written remarks to the hearing by Kim Jung-ho, chair of the National Assembly’s Climate, Energy, Environment and Labor Committee.

The last solar tender under the outgoing system, launched in July, sought about 1 GW at a ceiling price of KRW 147,686/MWh and added premiums of up to KRW 16,000/MWh for projects using low-carbon modules. That’s an early version of the preferential prices planned for the contract market.

Battery storage remains outside the new scheme and is procured through a separate central contract market run by the Korea Power Exchange. The ministry has also begun funding storage on congested distribution lines in the Honam and Jeju regions to connect queued solar projects.