• To strengthen the export competitiveness of firms under RE100 pressure and deter offshoring, Korea must urgently adopt measures to activate renewable energy procurement. Under current law, the integrated investment tax credit is used to spur corporate investment, including in renewable generation projects.

• However, the current scheme has not meaningfully expanded the RE100 market. Credit rates are far too low relative to the policy’s economic and security value, and structural features of renewable generation projects limit their practical utilization. Despite sustained calls from industry and academia and numerous bills introduced in the National Assembly, no effective reform has materialized.

• Accordingly, this issue paper seeks to improve the current tax incentive scheme to accelerate renewable deployment. Specifically, it proposes (i) raising the integrated investment tax credit rate for renewable generation projects; (ii) introducing transferability of credits to corporate offtakers that have executed direct power purchase agreements; and (iii) creating bonus credits for domestic-content use and community participation.

• To quantify the shortcomings of the current policy and the effects of the alternatives, we analyze the levelized cost of electricity (LCOE) and investment payback periods. Under the current regime, roughly 40% of nominal credit value is effectively lost, resulting in an LCOE reduction of less than 3% relative to the pre-credit baseline. By contrast, allowing transferability together with higher base and bonus rates reduces LCOE by approximately 23–25% and brings forward the payback point by about 2–3 years.

• A policy package that combines higher credit rates with transferability would resolve long-standing effectiveness gaps in Korea’s tax-credit policy for renewable generation and is expected to unlock greater investment in new projects.

https://doi.org/10.22982/NEXTIP2025.09.26