Renewable Energy Power Imbalance: A case of Jeju and Hawaii

Google, Starbucks, Amorepacific, SK... What do they have in common? They're all companies that have committed to RE100.

RE100 is a global campaign where companies pledge to power 100% of their operations with renewable energy. As of August this year, over 300 companies worldwide have joined the initiative. While the South Korean government's recently unveiled draft scenario for carbon neutrality, which aims for a 70% renewable energy target, has sparked much debate, the question remains: is achieving 100% renewable energy truly feasible?

To meet the RE100 goal, the expansion of renewable energy sources such as wind and solar power is essential. However, this comes with challenges that cannot be resolved simply by building more infrastructure. First, renewable energy production is highly variable, depending on weather conditions, making it difficult to meet the consistent power demands of industries like semiconductor manufacturing that require stable electricity supply. Additionally, since it's challenging to control the output in real-time, an oversupply of energy at any given moment can cause voltage imbalances in the power transmission and distribution lines, potentially leading to blackouts.

These issues are already evident on Jeju Island, where renewable energy facilities now account for nearly 65% of the total energy mix. Last year alone, there were 77 instances of "output control," where renewable generators were forcibly shut down due to mismatches in supply and demand, resulting in a total loss of 3.5 billion KRW (about $3 million). The Jeju Energy Corporation projects that if the island continues to expand its renewable energy capacity to achieve its "Carbon-Free Island 2030" goal, the amount of energy curtailed by 2030 could increase more than 130 times compared to the current level. A similar trend is being observed in Sinan County, South Jeolla Province, where large-scale solar power installations have been deployed.

Traditionally, such issues have been addressed by upgrading transmission facilities to send excess power to other regions. However, this approach also has its drawbacks, including high infrastructure costs, environmental impacts, and local opposition. Furthermore, building facilities based on peak demand times results in inefficiency, as they remain underutilized during off-peak periods. In the case of Jeju Island, the local government is planning to invest 230 billion KRW (about $180 million) in expanding transmission lines to send surplus renewable energy to the mainland, including South Jeolla Province. However, given that South Jeolla is also starting to experience similar output control issues, this solution may prove to be a temporary fix at best. According to the Jeju Energy Corporation, even with the planned transmission line upgrades, the amount of energy curtailed in 2030 is expected to increase more than 90 times compared to the current levels.

To overcome these challenges, advanced countries are actively leveraging the "energy solutions" industry. Energy solutions refer to service-based business models centered around energy. For instance, the Hawaiian Islands, like Jeju Island, experienced significant energy waste, with 20-50% of total renewable energy being curtailed during daylight hours due to excessive solar power generation. Unlike Jeju, Hawaii has no mainland nearby to which it can connect transmission lines. To address this, the Hawaiian government recently partnered with Swell Energy, a smart grid company, to implement a Virtual Power Plant (VPP) business model. This approach involves storing excess energy in batteries on a large scale and using the stored power during nighttime when energy supply is insufficient. Companies in the energy solutions industry have already generated over 1 trillion KRW in revenue in countries like the United States and Italy.

In South Korea, such developments are not as easy. The Korea Electric Power Corporation (KEPCO) monopolizes the transmission, wholesale, and retail markets, and government regulations on electricity prices make it difficult for companies to enter the energy solutions industry. It's time to consider fundamental solutions, including easing regulations on the electricity market, to address the renewable energy mismatch. Without these changes, the achievement of RE100 by Korean companies or the nation's carbon neutrality goals will undoubtedly be delayed. Furthermore, the share of the global market that our companies can capture in this growing sector will continue to diminish.