Analysis of Rural Photovoltaic (PV) Projects to Improve Farm Household Income
Published on March 16, 2021
Published by Economic Industrial Program Evaluation Division, Budget Analysis Department
Rural photovoltaic (PV) projects are being promoted for the purpose of expanding the penetration of new and renewable energy sources such as solar power and increasing farm household income pursuant to the "Act on the Promotion of the Development, Use, and Diffusion of New and Renewable Energy," "Plans to expand solar power supply in rural areas (2016)" and "Renewable Energy 3020 Implementation Plans (2017)." With the government pursuing its rural PV project with the target year of 2030, by analyzing the achievements and issues thus far at this middle juncture, improvements with which continued growth will be achieved have been identified.
Key implications resulting from the analyses are as follows:
First, currently, rural PV capacity is exceeding the rural PV penetration target set in the higher-level plans such as the Renewable Energy 3020 Implementation Plans, although its contribution to the energy structure's conversion into new and renewable energy sources is a positive aspect of the project. However, considering that the penetration growth of new and renewable energy sources, including PV, is the cause of the decline in the price of REC (Renewable Energy Supply Certificate), the main source of income for rural PV, it is necessary to help improve rural household incomes, as it is the purpose of the rural PV project, by preparing an institutional supplement.
Second, although the government is pursuing a farmer-participating rural PV project to enhance the profits of farmers and acceptance by community residents by breaking away from the rural PV project led by non-farmers and business operators, the results leave room for further improvement. Thus, improvement measures to revitalize the farmer-participating PV project by promoting the farmer participation model further and increasing incentives for participation, etc. need to be devised.
Third, there is need for some improvement in the performance management system related to farm household income growth as the project objective. Therefore, in order to establish key performance indicators (KPI) that will allow identifying farm household incomes before conducting fiscal projects, the actual state of farm household income information required to establish rural PV statistics needs to be ascertained in a more strengthened way. In addition, amidst the falling prices of SMP (System Marginal Price) and REC (Renewable Energy Certificate), which are the sources of income for the PV power generation business, and a small proportion of rural PVs that are subject to the Firm Fixed-Price Contract (FFP) to complement the losses generated from these two, measures that will rectify the situation also need to be developed.
Fourth, because the overall scale of farmland conversions are on the rise following rural PV installations, rural PV projects need to be implemented by taking into account retaining and securing suitable portions of farmland, etc. in a comprehensive manner.
In addition, although the number of PV installations in mountain areas has been decreasing since the relevant policy improvements in 2018, considering the increasing damage caused to existing mountain area PV facilities, Korea Forest Service and local governments, etc. need to make sure mountain PV related damages are prevented (where possible) and reduced (when not possible), and implement follow-up management measures accordingly.