South Korea’s renewable energy pivot can mitigate fossil fuel dependency risks

“The Republic of Korea as a whole must move very quickly toward renewable energy. Our future will be at serious risk if we continue to rely on fossil fuels,” said South Korean President Lee Jae Myung at a regional town hall on Jeju Island on 30 March 2026. The Iran conflict, which erupted on 27 February, sent shockwaves through global energy markets, raising crude oil prices by 50% and nearly doubling spot liquefied natural gas (LNG) prices. South Korea imports 97% of its energy needs — including approximately 70% of its crude oil and around 20% of its LNG from the Middle East — leaving it highly exposed to volatility in foreign currency-denominated global energy markets. Without decisive action to diversify energy sources and improve energy use, the country’s energy security and economic stability will remain vulnerable.

In response to the threat of commodity price spikes and supply disruptions, the South Korean government has introduced emergency measures to meet energy demand and mitigate inflation. These include a cap on fuel prices, efforts to secure alternative oil and gas supply, a temporary easing of coal generation limits, and an accelerated plan to restart five nuclear reactors. Two reactors have already resumed operations, with the remaining units scheduled to restart by May 2026.

Following a Cabinet meeting on 6 April, the government unveiled an accelerated roadmap that places renewable energy at the center of its strategy. Key measures include expanding renewables to over 20% of generation, accelerating the deployment of 100 gigawatts (GW) by 2030, and transitioning from gas-based thermal energy to renewable heat sources. This strategy also emphasizes restructuring the national grid into a more distributed and flexible system, while seeking to position South Korea among the world’s top three leaders in green manufacturing.

Rapid implementation of the proposed transition roadmap would help enhance price stability and strengthen energy access. Without this action, South Korea will remain exposed to supply disruptions and volatile energy costs, with significant implications for its economic security.

South Korea’s dilemma of prolonged fossil fuel dependency

South Korea is among the world’s largest importers of oil, LNG, and coal. In 2025, the country imported approximately 7 million metric tonnes of LNG from Qatar alone, accounting for 14.9% of total LNG imports. Coal imports are heavily concentrated among a few key suppliers, including Australia, Indonesia, and Russia. Meanwhile, LNG has played an increasing role in the energy mix in recent years. Coal and natural gas together account for 58% of electricity generation, while nuclear provides 31% and renewables around 10%.

This dependence is increasingly expensive in the current heightened gas price environment. Prior to the Iran conflict, LNG prices were around USD10 per million British thermal units (MMBtu). According to estimates by the Institute for Energy Economics and Financial Analysis (IEEFA), this price translated to approximately USD0.075 per kilowatt-hour (kWh) (KRW113/kWh). At current LNG market prices, however, that fuel cost has roughly doubled to USD0.15/kWh (KRW227/kWh).

“Marginal fuel costs” capture only the cost of LNG used to generate electricity, while excluding other recurring power-generation costs, including plant capital cost recovery, fixed and variable operations, and maintenance expenses. LNG fuel costs alone already fall within the Korea Electric Power Corporation’s (KEPCO) current retail electricity tariffs — approximately KRW95–123/kWh for industrial users and up to KRW307/kWh for residential consumers. Since KEPCO consumer tariffs must also cover transmission, distribution, and policy-related expenses, the fact that LNG fuel costs alone approach these levels illustrates the significant financial burden LNG places on the South Korean economy.

Switching to solar and onshore wind can be highly cost-effective

Renewable energy deployment in South Korea has been constrained by persistently high policy-related barriers and costs. According to Bloomberg New Energy Finance data for 2025, the country’s average installed costs were around USD1.20 per Watt (W) for solar photovoltaic (PV) (KRW1,813/W) and over USD2/W for onshore wind (KRW3,022/W) — approximately 80% and 250% above global averages, respectively.

These elevated costs reflect several factors, including historically high siting and construction expenses, domestic content preferences, permitting and approval challenges, and the relatively small and inconsistent scale of deployment, which has limited the benefits of learning curves and economies of scale.

Even after accounting for these higher upfront expenses, IEEFA has calculated that the total cost of financing, building, and operating renewable energy projects in South Korea is still competitive with — and in many scenarios, lower than — the marginal fuel costs of LNG-fired power generation. At current spot LNG market prices of approximately USD20/MMBtu, solar and wind are cheaper across all construction cost assumptions.

Based on current equipment and financing costs in South Korea, and under standard operating conditions, the calculated levelized cost of electricity (LCOE) for solar ranges from approximately USD0.70 to USD0.11 per kWh (KRW106–166/kWh), while onshore wind ranges from USD0.78 to USD0.12 per kWh (KRW117–181/kWh). 

If future South Korean projects could achieve the global average capital cost for solar PV of USD0.70/W (KRW1,058/W), IEEFA estimates that, based on South Korean financing costs, this could translate to an LCOE of around USD0.055/kWh (KRW82.9/kWh). Onshore wind, with a global average investment cost of about USD1.05/W (KRW1,587/W), could generate electricity at around USD0.05/kWh (KRW75/kWh). 

Once built, renewable energy projects have largely fixed and predictable costs, offering a stronger hedge against fossil fuel price volatility. South Korea should therefore prioritize policy, permitting, and implementation pathways that can unlock the low-cost, stable benefits that renewables have delivered in other markets.

Recent policy shifts in South Korea open new opportunities  

While immediate measures are being implemented to shield against the most acute impacts of the crisis — such as conservation efforts, fuel price caps, and electricity subsidies — more ambitious steps are needed to permanently shift energy demand away from fossil fuels. Even before the Iran conflict, South Korea had started addressing these long-standing constraints. Following the 6 April cabinet consensus, reached amid heightened energy security concerns, the stage is set to significantly accelerate the energy transition through the following strategies: 

• Expanding national renewable energy capacity by 2030  

The government aims to reach 100GW of renewable generation capacity by accelerating deployment and increasing the share of renewables to over 20% of total generation (from around 10% currently). Given the short construction timelines for solar projects, policies focus on expanding rooftop installations across industrial, commercial, and residential buildings, as well as parking areas and agricultural sites, with public-sector entities expected to lead the way as early adopters. 

• Sunlight Income Village program

This initiative promotes shared, village-scale solar systems (300kW to 1 megawatt), targeting 500 villages by 2026 and 2,500 by 2030. It aims to support both rural income generation and renewable deployment.

• Transitioning gas-based thermal energy to renewables

With gas currently accounting for 46% of building heating and cooking, the government is exploring incentives to accelerate a shift toward heat pumps and renewable-based district heating systems.

• RE100 industrial complexes

The government has proposed developing industrial parks where most, or even all, energy demand is met by renewable sources. By co-locating generation and consumption, these hubs aim to reduce costs and capture economies of scale, although implementation remains at the planning stages.

These initiatives are being supported by underlying legal reforms to laws aimed at removing long-standing barriers and disincentives, including:

• Liberalizing renewable siting

Siting criteria for renewable projects have been overhauled, creating uniform national standards established by Presidential Decree. Previously, several restrictive local regulations — including excessive building and road setback requirements — significantly constrained solar development, making many projects unviable. Under the revised framework, building-mounted rooftop solar installations are now exempt from siting rules, thereby enabling greater, more rapid deployment.

• Reforming the Renewable Portfolio Standard (RPS)

South Korea’s RPS requires generators to source a rising share of electricity from renewables, with targets set to increase from 12.5% in 2022 to 15% by the end of 2026 – a target the government reduced in 2024 from its intended 25% due to lackluster implementation. Despite lowered ambition, progress has still lagged. Compliance has relied primarily on renewable energy certificates (RECs), which have become expensive due to limited supply and have done little to drive capacity expansion.

Proposed reforms would shift the focus to physical deployment by introducing binding capacity targets, centralized auctions, and long-term contracts. Additionally, encouraging direct power purchase agreements (DPPAs), linking demand directly to new renewable supply, may further drive compliance.

• Creation of separate renewable energy and hydrogen energy acts

Amendments passed in February 2026 distinguish renewable energy from “new energy,” a category encompassing speculative, pre-commercial, and mostly fossil-derived energy technologies. This shift sharpens regulatory focus on renewable energy, offering a clearer implementation pathway for the above-mentioned measures to meet national targets and accelerate deployment across current and future plans.

While these measures signal intent, they also raise a broader question: how quickly can South Korea reduce its exposure to fossil fuel markets? Despite significant challenges — including regulatory bottlenecks and a heavy debt burden at the state-owned power utility — viable pathways for a rapid energy transition exist.  

South Korea’s clean energy moment is now

South Korea’s exposure to global energy shocks once again highlights the risks of its heavy reliance on imported fossil fuels. While recent disruptions have intensified these vulnerabilities, they have also strengthened the economic and financial case for accelerating the energy transition.

The country is laying the groundwork through policy reforms and is looking to significantly accelerate the deployment of cost-competitive renewable technologies. With strong technological, logistical, and manufacturing capabilities, South Korea is well-positioned to integrate green electrotechnology into its development plans and create long-term industrial benefits. The challenge now is ensuring speed and consistency in implementation.

By expediting renewable energy deployment, removing structural barriers, and enabling investment at scale, South Korea can reduce its exposure to volatile global markets while strengthening its fiscal position and long-term energy security.