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South Korea offers central market contracts for 260MWh energy storage in Jeju Island tender

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South Korea last week launched a competitive solicitation for large-scale energy storage systems on Jeju Island, a southern province of the country.

The South Korean Ministry of Trade, Industry and Energy (MOTIE) on 17 August announced the tender, through which it is opening up a “central contract market” for battery energy storage.

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The solicitation will seek battery energy storage system (BESS) resources totalling 65MW output and 260MWh. Projects eligible for bids will be of 4-hours or more duration, and will receive 15-year long-term contracts.  

The aim is to help effectively integrate the output of renewable energy generation on the island, which is a popular holiday destination known for its landscapes and sandy beaches as well as being home to Korea’s tallest mountain, the 1,950 metre Hallasan Mountain range. The island province is home to several hundred thousand people, but in 2022 (admittedly mid-pandemic) it welcomed more than 12 million domestic tourists.

The ministry said this marks the first time the Korean government has offered a central contract market for low-carbon power sources.

According to its release, compensation in the current electricity market system is set by a single wholesale price across the country, making it difficult to set reasonable tariffs for energy storage systems in particular locations.

Identifying Jeju Island as being in most urgent need of energy storage resources to help control the output of renewable energy generation and maintain stability of the electricity network, the central contract structure has been introduced there first.

MOTIE said the 60MW/260MWh volume being tendered for corresponds to needs modelled in the national 10th Basic Plan for Electricity Supply and Demand and would be sufficient in the short-term for stabilising the Jeju grid.

Bids will be judged on a combination of price and non-price factors, with the latter including things like technical capability, safety and contribution to local industry and economy.

South Korea had been a leader in energy storage deployments in the late 2010s, based largely on tariffs payable for commercial and industrial (C&I) energy storage systems, but this took a downturn following a spate of fires. The country is also home to some of the best-known lithium battery brands such as Samsung SDI, LG and SK.

Nonetheless, at the recent Energy Storage Summit Asia 2023 hosted by our publisher Solar Media, attendees heard the country is still perhaps the most mature energy storage market in the Asia-Pacific region after China, although the Australian market is now starting to see growing deployments of large-scale BESS facilities and Japan has recently reconfigured its power market regulations and created incentives for energy storage to help manage the integration of renewables.

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