The Higher Korean Tariffs Go, the Better PPAs Look: The 2026 Reform and the RE100 Maths

Contents (7)▾

The 2026 industrial electricity tariff reform has put one of the most direct questions back to companies working towards RE100: the price competitiveness of a PPA (power purchase agreement). If you have been putting off a PPA because of the received wisdom that "a PPA costs more than KEPCO", now is the time to test that premise itself again.

Why PPAs have been hesitated over until now

Since corporate PPAs were properly established in law in 2022, many companies have looked at a PPA in order to meet RE100, but fewer of them actually signed one than you might expect. The biggest reason was price competitiveness.

At the time, the average KEPCO unit price for Industrial (B) was in the mid-150 won per kWh range, whereas solar PPA prices were typically between KRW 170 and KRW 200 per kWh depending on site conditions and contract structure. Add KEPCO's network usage fee and the supplementary supply charge on top, and companies inevitably ran into the question: "do we have to accept billions of won in extra cost every year for the sake of carbon neutrality?"

Large companies joined global initiatives and came in despite the cost because of supply chain pressure, but for mid-sized and smaller manufacturers a PPA was in truth seen as an option where the rationale was clear but the arithmetic did not add up.

What the 2026 reform changed in the arithmetic

The reform substantially changed the distribution of KEPCO's unit prices across the day. With 18:00–21:00 in the evening raised to the peak band, the unit price for those hours rose sharply, and with the climate and environment charge and the fuel cost adjustment charge added on, the all-in unit price a company actually pays moves in the direction of being higher still. (The structure of the tariff reform itself is covered in a separate column, The 2026 electricity tariff reform. This article focuses on how that change affects PPA competitiveness.)

Solar PPA prices, by contrast, have shown a relatively stable trend over the past two to three years. Module prices did crash at one point and then rebound, but thanks to the long-term fixed price contract structure, PPAs have settled in as an asset somewhat insulated from market volatility. In short, KEPCO's rates move up and PPA prices move sideways, the gap narrows, and in some hours a crossover has already started to appear.

The following is an assumption-based reference example provided to aid understanding. Actual values vary with contract structure, site conditions, and usage pattern.

The trap in "comparing average unit prices"

Many companies, when reviewing a PPA, make a simple comparison of "KEPCO's average unit price vs the PPA price". But that way of comparing has itself become less meaningful since this reform.

A PPA is essentially a contract to be supplied with electricity generated during daytime hours. The hours in which a solar PPA generates are exactly the middle of the day, when KEPCO's rate is cheapest (11:00–15:00, mid-peak), plus some of the hours just before the peak. The meaningful comparison is therefore "the PPA price vs KEPCO's price in the same hours". And when you make that same-hours comparison, a PPA may still be somewhat more expensive.

Does that mean we should conclude a PPA has no appeal? No. The real value lies elsewhere.

The real value of a PPA = the "avoided cost"

To assess the economics of a PPA properly, you have to look at the substitution effect. When a PPA supplies your daytime power, the volume you draw from KEPCO falls by that much, and the reduction does not merely save you the unit price for those hours.

A corporate electricity bill charges the basic charge (based on maximum demand), the climate and environment charge, and the fuel cost adjustment charge alongside the energy charge by time of day. Power procured for yourself through a PPA is free of all of these additional charges. So even where the price per kWh looks similar, the burden actually avoided is far larger.

Factor in the cost of RE100 compliance as well and the picture changes again. To meet RE100 without a PPA you have to buy RECs separately, and uncertainty in the REC market is growing amid the move to abolish the RPS scheme. Because a PPA is a structure that secures electricity and RECs at the same time, the price should be seen as already carrying RE100 compliance value within it.

Impact · The four elements that make up PPA competitiveness (values a simple price comparison does not show)

Avoiding the evening peak

Gain

Daytime generation offsets the burden in the hours that became most expensive

• The 18:00–21:00 peak unit price jumped
• Daytime self-consumption shrinks the volume taken from KEPCO

Savings on the additional charges

Gain

Avoids charges beyond the price per kWh as well

• Eases the basic charge (maximum demand)
• Avoids the climate and environment and fuel cost adjustment charges

RE100 compliance built in

Gain

Electricity and RECs secured together in one contract

• No separate REC purchase needed
• Compliance value is already included in the price

Avoided REC market risk

Gain

A long-term fix that does not move with policy changes

• REC uncertainty amid the move to abolish the RPS
• A long-term contract shuts out price volatility

Which companies has it become particularly favourable for

Impact · The types for which PPAs have become more attractive since the reform

Manufacturers with high daytime utilisation

Gain

Generating hours and consuming hours overlap

• Sites that use a lot of electricity during the day
• Well placed to raise the self-consumption rate

Exporters responding to EU CBAM

Gain

The emission factor of electricity feeds straight into the export price

• KEPCO electricity = the national average emission factor applies
• PPA renewable electricity = an emission factor effectively close to zero

Component and materials firms in global supply chains

Gain

Responding to the buyer's RE100 requirements

• Some of the largest global buyers require RE100 of their suppliers
• A PPA is recognised as a highly credible compliance option

So should you adopt one right away

One important qualification has to be attached here. A PPA is generally a long-term contract of 10 to 20 years, so the decision carries real weight. It is therefore safer to work through the review in the following order.

Roadmap · The order in which to review adopting a PPA

Step 1

Analyse the usage pattern by time of day

Start by knowing exactly when and how much our company uses

Step 2

Scenarios under the new tariff structure

5~10 years

Apply the reformed rates to project the path of future power costs

Step 3

Compare total cost

Compare with the PPA avoided cost and RE100 compliance value added in

Step 4

Decide on the long-term contract

It is a 10 to 20 year contract, so settle it only once the evidence is in place

1. 1

   Step 1

   Analyse the usage pattern by time of day

   Start by knowing exactly when and how much our company uses

2. 2

   Step 2

   5~10 years

   Scenarios under the new tariff structure

   Apply the reformed rates to project the path of future power costs

3. 3

   Step 3

   Compare total cost

   Compare with the PPA avoided cost and RE100 compliance value added in

4. 4

   Step 4

   Decide on the long-term contract

   It is a 10 to 20 year contract, so settle it only once the evidence is in place

A PPA is no longer a cost you bear in order to meet RE100. It is a hedging asset against volatility in power costs over the next 10 years, and a ticket of entry into global supply chains.

In summary

The April 2026 reform looks like a simple adjustment of time bands, but it is in fact an event that has put the fundamental question of where a company will procure its electricity back on the table. It is a turning point away from the era of depending on KEPCO as a single source of supply and towards an era of distributed energy portfolios run by combining self-generation, PPAs, and ESS.

The heart of it is one thing. In a structure where KEPCO's rates rise and the PPA fixed price moves sideways, the moment you measure a PPA by unit price alone you lose sight of its value. Recalculate it from the standpoint of total cost, with the avoided cost and RE100 compliance value added in, and the real competitiveness of a PPA arrives at an entirely different conclusion.

• [Source: Korea Energy Agency, guidance on the K-RE100 scheme]
• [Source: KEPCO industrial electricity tariffs]
• [Source: European Commission guidance on CBAM (the Carbon Border Adjustment Mechanism)]

Note: The prices, charges, and avoided cost figures in the text are assumption-based reference examples provided to aid understanding, and actual values vary with contract structure, site conditions, usage pattern, and changes in policy. Policies and cases of particular companies are described in generalised terms. An on-site diagnosis and expert review are needed before adoption.