NEXT group

Energy Climate Policy Think Tank

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NEXT group is an independent energy and
climate policy think tank contributing to Asia’s
net-zero energy transition.

SPOTLIGHT

Enhancing the Effectiveness of Renewable Energy Tax Incentives through Transferability : A Quantitative Analysis Current Status and ChallengesKorea faces difficulties in renewable energy procurement due to high prices and limited supply, making it one of the more challenging markets for corporate renewable energy sourcing. The current investment tax credit for renewable power facilities applies the same low rate as general facility investments, and due to the unique characteristics of renewable energy projects, companies are unable to fully benefit from the incentive. As a result, corporate motivation to invest in renewable energy remains very limited. Quantitative AnalysisFor both solar and wind power projects, analysis shows that under the current system— even with the application of tax credits and carryforwards— around 40% of potential benefits are lost, reducing the levelized cost of electricity (LCOE) by less than 3%. In contrast, introducing a higher tax credit rate and a transfer mechanism could lower generation costs by up to 23–25% and shorten the investment payback period by approximately 2–3 years. Policy Recommendations1. Increase Tax Credit Rate: Apply a tax credit rate equivalent to that for national strategic technologies to renewable energy generation projects.2. Introduce Transfer Mechanism: Allow the transfer of tax benefits to companies entering into direct PPAs as assignees.3. Establish Additional Credits: Provide incremental tax incentives for projects that use domestically produced equipment or adopt community participation models. 2025.10.14

Writing the Next Chapter for Korea's Renewable Energy Market · Green Premium:While the scheme offers the advantage of low-cost renewable energy procurement, it still has limitations in terms of recognizing greenhouse gas (GHG) reduction achievements and driving additional renewable deployment. Enhancing certificate transparency and traceability, as well as expanding participation by general consumers, is necessary.· Utility Green Tariff (UGT):The current limited role of KEPCO (Korea Electric Power Corporation) should be expanded so that third-party PPAs can be transformed into customized tariffs led by KEPCO. By aggregating small-scale solar and behind-the-meter (BTM) resources, it is possible to design more competitive tariff schemes.· Korean-style VPPA:To overcome the limitations of the current REC-based virtual PPA, the introduction of derivative financial instruments and risk-management intermediaries is recommended. Allowing REC resale and fostering a secondary market would further strengthen the mechanism.· Direct PPA:Although direct PPAs provide price competitiveness, issues remain regarding contract rigidity, lack of tax incentives, and financial risks. Suggested improvements include enhancing contractual flexibility, introducing tax credits, and establishing government guarantees and insurance schemes. 2025.08.31

Strategic Transformation of Korea’s Petrochemical Complexes The global petrochemical industry is facing structural stagnation due to oversupply, threatening the regional economies of Korea’s three main complexes (Yeosu, Daesan, Ulsan). Current government measures lack effectiveness and fail to account for each site's specific challenges and capabilities. The Korea petrochemical industry needs to shift to a new growth sector, backed by real investment to ease regional stagnation.Key transition strategies identified for each complex are:-Yeosu: Technology testbed for transition to clean chemical industry-Daesan: Commercialization of alternative feedstocks and introduction of low-carbon infrastructure-Ulsan: Leadership in clean hydrogen and plastics recycling businessesKey transition technologies’ economic analysis shows heat pumps and methane pyrolysis lower long-term costs and eliminate greenhouse gases. Electric heating raises costs with renewable energy use but cuts carbon emissions by over 90%. About 2.9 trillion KRW short-term investment, renewable infrastructure expansion, and financial support are needed for successful transition and commercialization across the three petrochemical complexes.*This issue paper is a follow-up to <A Net Zero Roadmap for South Korea’s Petrochemical Industry>, published by NEXT group in November 2024. 2025.08.04

Green Steel: an Opportunity Closer Than You Think To stay competitive in a steel market facing global oversupply and rising trade barriers, Korea must shift toward green steel. Demand is accelerating—especially from European automakers—with projections rising from 15 million tons in 2021 to over 200 million tons by 2030. Korea’s path to market entry is through DRI-EAF technology. EAF capacity is expanding, and using a 70% DRI and 30% scrap mix can cut emissions by 81% versus BF-BOF. But success depends on securing affordable, high-quality DRI. #GreenDRI #greensteel #gasDRI #HydrogenDRI #Australia #MiddleEast --> Green Steel: an Opportunity Closer Than You Think In the short term, Korea must import gas-based DRI—primarily from the Middle East, which offers the lowest cost and largest scale. Long term, hydrogen-based DRI will become essential, with Australia as a strategic partner thanks to cheap solar power and abundant ore. DRI-EAF raises production costs by about 18%. To stay competitive, Korea must scale Carbon Contracts for Difference (CCfDs) and strengthen partnerships across key regions. Without timely action, Korea risks losing its place in the emerging green steel economy. Korea must secure gas-based DRI in the short term to stay competitive in the global green steel race. ※ This issue paper is a follow-up to Korea Net Zero Steel Roadmap II (KNZS II), published by NEXT group in October 2024. document.addEventListener("DOMContentLoaded", function() { document.title = "NEXT group | Green Steel: an Opportunity Closer Than You Think "; document.querySelector('meta[property="og:title"]').setAttribute("content", "NEXT group | Green Steel: an Opportunity Closer Than You Think "); let metaDescription = document.querySelector('meta[name="description"]'); if (!metaDescription) { metaDescription = document.createElement("meta"); metaDescription.name = "description"; document.head.appendChild(metaDescription); } metaDescription.setAttribute("content", "Green Steel: an Opportunity Closer Than You Think"); }); 2025.04.14

A Window of Opportunity: Quantitative Analysis of the Production Capacity of Key Components in the Korean Offshore Wind Supply Chain Effective strategies for supporting the offshore wind supply chain industry require quantitative data on supply-demand gaps. To address this, this study employed a bottom-up approach to quantify the production capacities of domestic offshore wind supply chain companies and established a comprehensive database. Based on this database and current market conditions, respective supply and demand scenarios were developed. --> ? Content Analyzing the component-specific supply-demand gaps across combined supply and demand scenarios revealed that substructures, cables (static array and export), and mooring lines exhibit sufficient production capacity to meet or exceed projected demand in almost all scenario combinations. However, significant shortages are projected for turbine system components (nacelles, blades, and towers) in most scenarios. Notably, the most severe supply deficits involve the 15 MW-class turbine system,which could experience shortages as early as this year. Additionally, dynamic array cables for floating offshore wind currently have no production capacity domestically, leading to anticipated shortages beginning next year. Estimating the investment required to address the component-specific supply-demand gaps identified above, solely through expansion of domestic production capacity, revealed that additional facility investments ranging from a minimum of KRW 2.31 trillion to a maximum of KRW 3.04 trillion would be needed, depending on the demand scenario. To rapidly close these supply gaps, the government should facilitate timely investment through proactive financial support and by establishing a long-term offshore wind deployment roadmap. The purpose of this study is to provide a quantitative basis for systematically formulating strategies to support the offshore wind supply chain industry. As the first foundational research applying a scientific methodology to establish domestic offshore wind supply chain support strategies, this study is expected to serve as a guideline for determining specific timelines and financial support requirements in future policy formulation. document.addEventListener("DOMContentLoaded", function() { document.title = "NEXT group | A Window of Opportunity: Quantitative Analysis of the Production Capacity of Key Components in the Korean Offshore Wind Supply Chain"; document.querySelector('meta[property="og:title"]').setAttribute("content", "NEXT group | A Window of Opportunity: Quantitative Analysis of the Production Capacity of Key Components in the Korean Offshore Wind Supply Chain"); let metaDescription = document.querySelector('meta[name="description"]'); if (!metaDescription) { metaDescription = document.createElement("meta"); metaDescription.name = "description"; document.head.appendChild(metaDescription); } metaDescription.setAttribute("content", "A Window of Opportunity: Quantitative Analysis of the Production Capacity of Key Components in the Korean Offshore Wind Supply Chain"); }); 2025.04.02

Latest Publications

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Issue Papers Enhancing the Effectiveness of Renewable Energy Tax Incentives through Transferability : A Quantitative Analysis Current Status and ChallengesKorea faces difficulties in renewable energy procurement due to high prices and limited supply, making it one of the more challenging markets for corporate renewable energy sourcing. The current investment tax credit for renewable power facilities applies the same low rate as general facility investments, and due to the unique characteristics of renewable energy projects, companies are unable to fully benefit from the incentive. As a result, corporate motivation to invest in renewable energy remains very limited. Quantitative AnalysisFor both solar and wind power projects, analysis shows that under the current system— even with the application of tax credits and carryforwards— around 40% of potential benefits are lost, reducing the levelized cost of electricity (LCOE) by less than 3%. In contrast, introducing a higher tax credit rate and a transfer mechanism could lower generation costs by up to 23–25% and shorten the investment payback period by approximately 2–3 years. Policy Recommendations1. Increase Tax Credit Rate: Apply a tax credit rate equivalent to that for national strategic technologies to renewable energy generation projects.2. Introduce Transfer Mechanism: Allow the transfer of tax benefits to companies entering into direct PPAs as assignees.3. Establish Additional Credits: Provide incremental tax incentives for projects that use domestically produced equipment or adopt community participation models. 2025.10.14 / Ayeong Kim et al

etc Writing the Next Chapter for Korea's Renewable Energy Market · Green Premium:While the scheme offers the advantage of low-cost renewable energy procurement, it still has limitations in terms of recognizing greenhouse gas (GHG) reduction achievements and driving additional renewable deployment. Enhancing certificate transparency and traceability, as well as expanding participation by general consumers, is necessary.· Utility Green Tariff (UGT):The current limited role of KEPCO (Korea Electric Power Corporation) should be expanded so that third-party PPAs can be transformed into customized tariffs led by KEPCO. By aggregating small-scale solar and behind-the-meter (BTM) resources, it is possible to design more competitive tariff schemes.· Korean-style VPPA:To overcome the limitations of the current REC-based virtual PPA, the introduction of derivative financial instruments and risk-management intermediaries is recommended. Allowing REC resale and fostering a secondary market would further strengthen the mechanism.· Direct PPA:Although direct PPAs provide price competitiveness, issues remain regarding contract rigidity, lack of tax incentives, and financial risks. Suggested improvements include enhancing contractual flexibility, introducing tax credits, and establishing government guarantees and insurance schemes. 2025.08.31 / Seungwan Kim et al

Issue Papers Strategic Transformation of Korea’s Petrochemical Complexes The global petrochemical industry is facing structural stagnation due to oversupply, threatening the regional economies of Korea’s three main complexes (Yeosu, Daesan, Ulsan). Current government measures lack effectiveness and fail to account for each site's specific challenges and capabilities. The Korea petrochemical industry needs to shift to a new growth sector, backed by real investment to ease regional stagnation.Key transition strategies identified for each complex are:-Yeosu: Technology testbed for transition to clean chemical industry-Daesan: Commercialization of alternative feedstocks and introduction of low-carbon infrastructure-Ulsan: Leadership in clean hydrogen and plastics recycling businessesKey transition technologies’ economic analysis shows heat pumps and methane pyrolysis lower long-term costs and eliminate greenhouse gases. Electric heating raises costs with renewable energy use but cuts carbon emissions by over 90%. About 2.9 trillion KRW short-term investment, renewable infrastructure expansion, and financial support are needed for successful transition and commercialization across the three petrochemical complexes.*This issue paper is a follow-up to <A Net Zero Roadmap for South Korea’s Petrochemical Industry>, published by NEXT group in November 2024. 2025.08.04 / Sugang Kim

Issue Briefs In the Era of Climate Crisis, An Unforeseen Disaster Called Flash Drought Flash droughts are an emerging type of drought that has newly emerged as climate change intensifies hydrologic extremes. Within days to weeks, they can rapidly deplete water resources due to a combination of precipitation deficits and high temperatures that increase evapotranspiration. --> HIGHLIGHTS : Flash droughts are already occurring in South Korea, with a marked rise in heatwave-induced flash droughts during summer. Their impact goes beyond agriculture, affecting municipal water supplies as well. However, the conventional drought definition emphasizes a slow-onset, long-duration phenomenon. This leaves flash droughts largely invisible within existing early warning, monitoring, and response systems. As a result, South Korea's current monthly drought statistics and warning systems often fail to detect them, even when real-world damage is occurring during officially ‘drought-free’ periods. Due to their ability to rapidly exhaust water resources, flash droughts pose a major threat to sustainable water management. Addressing them requires a new operational definition. We also need high-temperature-based indices and integration of weekly forecasts into drought monitoring, statistics, and response frameworks. --> document.addEventListener("DOMContentLoaded", function() { document.title = "NEXT group | In the Era of Climate Crisis, An Unforeseen Disaster Called Flash Drought"; document.querySelector('meta[property="og:title"]').setAttribute("content", "NEXT group | In the Era of Climate Crisis, An Unforeseen Disaster Called Flash Drought"); let metaDescription = document.querySelector('meta[name="description"]'); if (!metaDescription) { metaDescription = document.createElement("meta"); metaDescription.name = "description"; document.head.appendChild(metaDescription); } metaDescription.setAttribute("content", "Flash droughts are an emerging type of drought that has newly emerged as climate change intensifies hydrologic extremes. Within days to weeks, they can rapidly deplete water resources due to a combination of precipitation deficits and high temperatures that increase evapotranspiration."); }); 2025.07.14 / Haesoo Jung

Issue Papers A Comprehensive Assessment of Costs and Emissions in the Imported Green Hydrogen Value Chain for Korea This issue paper presents a stage-by-stage cost analysis of importing green hydrogen from Australia to Korea, covering conversion, maritime shipping, storage, re-conversion, and distribution. The analysis estimates import costs for both ammonia and liquefied hydrogen under different technological scenarios. #GreenHydrogen #imported hydrogen #carbon price #Hydrogen Economy --> A Comprehensive Assessment of Costs and Emissions in the Imported Green Hydrogen Value Chain for Korea Under current technology assumptions, ammonia imports were found to be more cost-effective (USD 2.80–7.61/kgH₂) than liquefied hydrogen (USD 5.27–9.41/kgH₂). The most economical pathway involves transporting ammonia via LNG-powered vessels and distributing it using battery electric vehicles (BEVs), with estimated costs of USD 4.30/kgH₂ by 2030 and USD 3.24/kgH₂ by 2040. -Ammonia offers roughly 1.8 times higher storage density than liquefied hydrogen in the same vessel volume, along with lower boil-off rates, resulting in reduced losses during shipping and storage. -At the re-conversion stage, ammonia cracking was approximately 8.7 times more costly than hydrogen gasification due to significantly higher energy requirements. -Despite being carbon-free, ammonia-fueled vessels are not yet cost-competitive with LNG-fueled vessels in the absence of carbon pricing. Achieving price parity would require a sufficiently high carbon price. -For inland distribution in Korea, hydrogen transport using BEVs is already more cost-efficient than internal combustion engine vehicles (ICEVs). Based on these findings, the study recommends the following to reduce overall costs and emissions across the value chain: (1) Increase investment in ammonia cracking technology to improve energy efficiency. (2) Expand R&D to scale up storage capacity and lower boil-off losses. (3) Internalize carbon pricing in the shipping and distribution stages to reflect associated emissions. 2025.05.14 / Seungwan Kim et al

Events

[Event Review] 2025 East Asia Energy Transition International Roundtable 자세히보기

[Event Review] Power Sector Transformation in Asia: Strategies for a Renewable Future and Grid Flexibility (2025.08.26) 자세히보기

[Seminar] Power Sector Transformation in Asia: Strategies for a Renewable Future and Grid Flexibility(August 26, 2025) 자세히보기

[Webinar] Petrochemical Industry in a Crisis – Time for a Carbon Diet 자세히보기

[Webinar] The Road to Net-zero Steel in Korea and Japan 자세히보기

YOUTUBE

The EV Era: What’s the Fate of Korea’s Auto Industry?

EV Transition: Why Is Korea Lagging Behind?

Coal Phase-Out Watcher NEXT Electricity Outlook 2025 - Part 2 (2)

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