Subsidizing the Shift to Renewable Energy in Korea: A Levelized Cost Analysis and Computation of Required Subsidies

Abstract

This study addresses the pivotal challenge of transitioning from nuclear to renewable energy sources, considering the distinctive energy landscape of South Korea characterized by high land costs and high dependence on nuclear energy. Amidst global momentum toward sustainable and carbon-neutral energy, South Korea’s Renewable Energy 3020 Implementation Plan aims to achieve 20% of power generation from renewables by 2030. Shifting away from nuclear energy, however, may lead to rising energy costs, supply disruptions, and environmental ramifications. Furthermore, achieving grid parity between renewable energy and nuclear power by the late 2030s is unlikely, in contrast to earlier projections. This is primarily due to the comparatively lower production cost of nuclear energy. To expedite the shift toward renewable energy, our study suggests transitioning from the Renewable Energy Portfolio Standard (RPS) to a Feed-in-Tariff (FiT) system. This change would offer voluntary incentives for investment in renewable energy. Additionally, we compute Feed-in-Tariff subsidies required to achieve grid parity by 2030, concluding that the amount of subsidies required to reach grid parity by 2030 is 54% of retail electricity price. This research offers valuable insights for policy formulation and energy transition planning.