REC base price last year, likely to fall 20% year-on-year

REC base price last year, likely to fall 20% year-on-year

With the spot market price of the Renewable Energy Supply Certificate (REC) falling sharply, some predict that the standard price of REC will also fall by 20 percent last year. According to the power generation industry, the 2019 REC base price, which is scheduled to be announced by the Korea Power Exchange next month, is expected to fall by nearly 15,000 won to 20,000 won from the 2018 price of 87,833 won.

The REC standard price is the price determined by the government to compensate for expenses incurred by the RPS supplier after the supply's performance. Each year, the Korea Power Exchange sets the standard price and KEPCO pays the standard price for the compensation. Power companies will be compensated for the cost by multiplying the number of RECs they secured last year by the standard price.

For the past three years, the benchmark price of REC has been 86,508 won in 2016 ▶104,688 won in 2017 ▶ 87,833 won in 2018. Industries predict that REC's standard price will also be between 73,000 won and 68,000 won last year as REC spot market prices have plummeted since 2018. Compared to last year, the figure has dropped by 20 percent.

REC spot market prices fell to 48,323 won at the end of last year from 75,218 won at the beginning of the year, according to the Korea Power Exchange's REC trading trend. The annual average price also dropped sharply to 63,349 won. The REC reference price is set based on the execution of RPS obligations and the average unit price of REC weighted at the time the REC is issued and receives a price impact in the spot market.

The REC reference price is determined by calculating the weighted average unit price for spot market prices, in-house contracts and in-house construction costs. Among them, the selection contract (fixed price contract) and bio-mix will be excluded from bidding at the Korea Energy Agency's New Renewal Center. The REC trading volume in the spot market last year was 7,191,767REC, or 36% of the total trading volume of 1,957,259REC.

"Although last year's standard price is still being sorted out on the Korea Power Exchange, we can expect some REC standard price from within the power plant based on the record of one-year accident sales," an industry source said. "As REC prices continue to fall recently, last year's standard price will inevitably fall compared to 2018."

Source: Itu News